Your SlideShare is downloading. ×
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Intest payable receivable under it act.bose
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Intest payable receivable under it act.bose

345

Published on

Published in: Technology, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
345
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
11
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Interest paid on delayed payment of income tax cannot be set off against the interest received on income tax refundRecently, the Pune Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case ofSandvik Asia Ltd1(the taxpayer), while giving effect to the order of the Third member, held thatthe interest paid on delayed payment of income tax cannot be set off against the interest receivedon income tax refund. Further, it was also held that the said interest was not allowed as businessexpenditure under the Income-tax Act, 1961 (the Act).1 SandvikAsia Ltd v. DCIT (ITA No 1271/PN/1995)2R N Aggarwal v. ITO [1982] SOT 361 (Del)3 Cynamide (India) Ltd v. ITO [ITA No. 4561/Mum/1991-92]Facts of the case• The taxpayer received interest on refunds and also paid interest on delayed payment of advancetax. The taxpayer set-off interest paid against interest received and offered net interest as businessincome in its return of income.• The Assessing Officer (AO) added back the amount of interest paid to the net amount of interestoffered by the taxpayer. The AO disallowed the taxpayers claim on the ground that interest paidto the tax department was not business expenditure.• The Commissioner of Income-tax (Appeal) [CIT(A)] allowed the taxpayer’s claim relying onthe decisions in the case of R N Aggarwal 2 and Cynamide (India) Ltd 3.• Further, there was difference of opinion between the members of divisional bench of theTribunal. Accountant Member of the Tribunal was of the opinion that between the taxpayer andthe tax department there can be only one account. Therefore, interest paid and interest received bythe taxpayer should be set off against each other. On the other hand the Judicial Member reliedon the various decisions and was of the opinion that the interest paid on delayed payment ofincome tax was neither allowable as business expenditure nor under any other provisions of theAct.• Therefore, the matter referred to the third member for a majority opinion.Issues before the Third Member• Whether the interest paid on the delayed payment of income tax allowed as businessexpenditure?• Whether the interest received and paid to the tax department can be adjusted against each other?Tax department’s contentions• The principle of netting the interest paid and received cannot be accepted. The receipt of interestis taxable but payment of interest is not allowable as deduction as there is no provision in the Act.• For the taxpayer, the interest is paid and received from the income-tax department. However,the income tax department does not maintain any ledger account for any taxpayer. Further therule of netting was held inapplicable by the Supreme Court in the case of Dr. V P Gopinathan 4.• Relying on the Supreme Court’s decision in the case of Kedarnath Jute Mfg. Co. Ltd 5the taxdepartment contended that the method of accounting followed by the taxpayer was not relevantand only the statutory provisions and the judgments on the subject are to be analysed.
  • 2. • Further the tax department relied on the decision in the case of Usha Sales Ltd 6and contendedthat irrespective of the accounts maintained by the taxpayer, the AO had the power to pick out theitems of taxable receipts and disallow interest payments which was not allowed under anyspecific provision of the Act.• The tax department contended that the income tax payable and receivable can be adjusted onlyto the extent provided in Section 245 of the Act and the taxpayer cannot adjust the tax due for aparticular year against refund due for another year. Therefore, when principal amount of tax itselfcannot be netted, interest for delayed payment of income tax cannot be netted against interestreceived on income-tax refund.4 CIT v. Dr. V P Gopinathan [2001] 248 ITR 449 (SC)5 Kedarnath Jute Mfg. Co. Ltd v. CIT [1971] 82 ITR 363 (SC)6 Usha Sales Ltd v. CIT [2002] 254 ITR 145 (Del)• The receipt of interest was taxable but the payment of interest was not allowable as deduction asthere was no provision in the Act to allow interest on delayed payment of income tax.• Further, the different Sections of the Act provide for different payments/refunds and thereforethe nature of the interest should depend on these statutory provisions. The tax departmentcontended that Section 234C of the Act is for deferment of advance tax whereas Section 244A ofthe Act deals with refunds. These Sections deals with different subject and they occur in differentchapters and even the rate of interest is different. Therefore, it cannot be contended that both areof the same nature to be merged.Taxpayer’s contentions• The Supreme Court’s decision in the case of Dr. V P Gopinathan was not against the taxpayer’sclaim as the fact and the controversy in that case were different. Further, the decision in the caseof Hazarimal Nandlal7was also not applicable to the taxpayer as in that case interest paid andreceived were on different accounts unlike the present case where the interest paid and receivedare of the same type and therefore nettable.• The taxpayer relied on the decision in the case of Aruna Mills Ltd 8and contended that theinterest received and paid should be adjusted against each other and only net income should beassessed.• Further, the taxpayer contended that it was not a question of claiming deduction in respect of theinterest paid against the interest received, but it was a question of assessing the income on thebasis of netting principle.• Since, the taxpayer has a single account with the tax department, the interest received and paidto the tax department, should be set off against each other irrespective of the fact that they mightbe related to different years.• The taxpayer contended that if the nature of the interest is on substantially the same account, thefact that the interest paid or received under different provisions of the Act should not affect thequestion of what is to be taxed.7 ACIT v. Hazarimal Nandlal (ITA No. 240 and 241/Gau/1999)8 Aruna Mills Ltd v. CIT [1957] 31 ITR 153 (Bom)
  • 3. Third Member’s Ruling• The Third Member gave a specific observation that having regard to the legal position, intereston refunds of tax was always assessable under the residuary head. However, the taxpayer itselfhas shown the net interest received as business income and there was no dispute before theTribunal as to the head under which the interest income was to be assessed.• Relying on the Supreme Court’s decision in the case of Bharat Commerce and Industries Ltd 9,the Third Member held that:The interest payment on delayed payment of income tax should not be allowed as deductionunder Section 36(1)(iii) of the Act as there was no borrowing by the taxpayer.Interest on delayed payment of tax should also not be allowed under Section 37(1) of the Actas in the said case it was held that the interest payment for failure to pay advance tax and delay infilling of income tax return was not allowed under Section 37(1) of the Act.• The Bombay High Court in the decision of Aruna Mills Ltd taken as similar view which wasreferred by the Supreme Court while arriving at its decision in the case of Bharat Commerce.• The Third Member relied on the decision in the case of Dr. V P Gopinathan and held that therule of netting off did not apply to the taxpayer as the Supreme Court in the above mentionedcase ruled that the interest paid to bank cannot be reduced from the interest received on fixeddeposit with bank. The taxpayer could reduce such interest only if there was a provision in lawwhich permits such diminution.• Further, reliance was also placed on the case of Aruna Mills Ltd wherein it was held that therewas no relationship between the interest received and paid under the provision relating topayment of advance tax. The interest paid in the said case was not compensation for the use ofmoney but for the default in complying with the statutory obligation of advance tax payment.Thus, the nature of payment was penalty. Accordingly, the netting off was not allowed to thetaxpayer.• The Third Member held that the effect of the decisions of the Tribunal relied by the taxpayercannot be given as there were Supreme and High Court’s decisions on the same point.• In the context of above the Third Member of the Tribunal held that the interest payment cannotbe allowed as deduction from the interest received.9 Bharat Commerce and Industries Ltd v. CIT [1988] 230 ITR 733 (SC)Our commentsThis is an important ruling on the issue of set off of interest paid on delayedpayment of income tax and interest on income tax refunds. There are variousdecisions on this issue. Recently, the Mumbai held that the taxpayer can set offthe interest on income tax refunds against the interest paid on delayed paymentof income tax on the basis of decisions in the case of R. N. Aggarwal andCynamide (India) Ltd.
  • 4. Section 64- INCOME OF INDIVIDUAL TO INCLUDE INCOME OF SPOUSE, MINOR CHILD, ETC.(1) In computing the total income of any individual, there shall be included allsuch income as arises directly or indirectly -(ii) To the spouse of such individual by way of salary, commission, fees or anyother form of remuneration whether in cash or in kind from a concern in whichsuch individual has a substantial interest :Provided that nothing in this clause shall apply in relation to any income arising tothe spouse where the spouse possesses technical or professional qualificationand the income is solely attributable to the application of his or her technical orprofessional knowledge and experience;(iv) Subject to the provisions of clause (i) of section 27, to the spouse of suchindividual from assets transferred directly or indirectly to the spouse by suchindividual otherwise than for adequate consideration or in connection with anagreement to live apart;(vi) To the sons wife, of such individual from assets transferred directly orindirectly on or after the 1st day of June, 1973, to the sons wife by suchindividual otherwise than for adequate consideration;(vii) To any person or association of persons from assets transferred directly orindirectly otherwise than for adequate consideration to the person or associationof persons by such individual to the extent to which the income from such assetsis for the immediate or deferred benefit of his or her spouse.(viii) To any person or association of persons from assets transferred directly orindirectly on or after the 1st day of June, 1973, otherwise than for adequateconsideration, to the person or association of persons by such individual, to theextent to which the income from such assets is for the immediate or deferredbenefit of his sons wife.Explanation 1 : For the purposes of clause (ii), the individual in computing whosetotal income the income referred to in that clause is to be included, shall be thehusband or wife whose total income (excluding the income referred to in thatclause) is greater; and where any such income is once included in the totalincome of either spouse, any such income arising in any succeeding year shallnot be included in the total income of the other spouse unless the AssessingOfficer is satisfied, after giving that spouse an opportunity of being heard, that itis necessary so to do.
  • 5. Explanation 2 : For the purposes of clause (ii), an individual shall be deemed tohave a substantial interest in a concern -(i) In a case where the concern is a company, if its shares (not being sharesentitled to a fixed rate of dividend whether with or without a further right toparticipate in profits) carrying not less than twenty per cent of the voting powerare, at any time during the previous year, owned beneficially by such person orpartly by such person and partly by one or more of his relatives;(ii) In any other case, if such person is entitled, or such person and one or moreof his relatives are entitled in the aggregate, at any time during the previous year,to not less than twenty per cent of the profits of such concern.Explanation 3 : For the purposes of clauses (iv) and (vi), where the assetstransferred directly or indirectly by an individual to his spouse or sons wife(hereafter in this Explanation referred to as "the transferee") are invested by thetransferee, -(i) In any business, such investment being not in the nature of contribution ofcapital as a partner in a firm or, as the case may be, for being admitted to thebenefits of partnership in a firm, that part of the income arising out of thebusiness to the transferee in any previous year, which bears the same proportionto the income of the transferee from the business as the value of the assetsaforesaid as on the first day of the previous year bears to thetotal investment in the business by the transferee as on the said day;(ii) In the nature of contribution of capital as a partner in a firm, that part of theinterest receivable by the transferee from the firm in any previous year, whichbears the same proportion to the interest receivable by the transferee from thefirm as the value of investment aforesaid as on the first day of the previous yearbears to the total investment by way of capital contribution as a partner in thefirm as on the said day, shall be included in the total income of the individual inthat previous year.(1A) In computing the total income of any individual, there shall be included allsuch income as arises or accrues to his minor child not being a minor childsuffering from any disability of the nature specified in section 80U:Provided that nothing contained in this sub-section shall apply in respect of suchincome as arises or accrues to the minor child on account of any(a) Manual work done by him; or(b) Activity involving application of his skill, talent or specialised knowledge andexperience.
  • 6. Explanation : For the purposes of this sub-section, the income of the minor childshall be included, -(a) Where the marriage of his parents subsists, in the income of that parentwhose total income (excluding the income includible under this sub-section) isgreater; or(b) Where the marriage of his parents does not subsist, in the income of thatparent who maintains the minor child in the previous year, and where any suchincome is once included in the total income of either parent, any such incomearising in any succeeding year shall not be included in the total income of theother parent, unless the Assessing Officer is satisfied, after giving that parent anopportunity of being heard, that it is necessary so to do.(2) Where, in the case of an individual being a member of a Hindu undividedfamily, any property having been the separate property of the individual has, atany time after the 31st day of December, 1969 been converted by the individualinto property belonging to the family through the act of impressing such separateproperty with the character of property belonging to the family or throwing it intothe common stock of the family or been transferred by the individual, directly orindirectly, to the family otherwise than for adequate consideration (the propertyso converted or transferred being hereinafter referred to as the convertedproperty) then, notwithstanding anything contained in any other provision of thisAct or in any other law for the time being in force, for the purpose of computationof the total income of the individual under this Act for any assessment yearcommencing on or after the 1st day of April, 1971, -(a) The individual shall be deemed to have transferred the converted property,through the family, to the members of the family for being held by them jointly;(b) The income derived from the converted property or any part thereof shall bedeemed to arise to the individual and not to the family;(c) Where the converted property has been the subject-matter of a partition(whether partial or total) amongst the members of the family, the income derivedfrom such converted property as is received by the spouse on partition shall bedeemed to arise to the spouse or minor child from assets transferred indirectly bythe individual to the spouse and the provisions of sub-section (1) shall, so far asmay be, apply accordingly:Provided that the income referred to in clause (b) or clause (c) shall, on beingincluded in the total income of the individual, be excluded from the total incomeof the family or, as the case may be, the spouse of the individual.Explanation 1 : For the purposes of sub-section (2), - "Property" includes anyinterest in property, movable or immovable, the proceeds of sale thereof and any
  • 7. money or investment for the time being representing the proceeds of sale thereofand where the property is converted into any other property by any method, suchother property.Explanation 2 : For the purposes of this section, "income" includes loss.Section 65- LIABILITY OF PERSON IN RESPECT OF INCOME INCLUDED IN THE INCOME OF ANOTHER PERSON.Where, by reason of the provisions contained in this Chapter or in clause (i) ofsection 27, the income from any asset or from membership in a firm of a personother than the assessee is included in the total income of the assessee, theperson in whose name such asset stands or who is a member of the firm shall,notwithstanding anything to the contrary contained in any other law for the timebeing in force, be liable, on the service of a notice of demand by the AssessingOfficer in this behalf, to pay that portion of the tax levied on the assessee whichis attributable to the income so included, and the provisions of Chapter XVII-Dshall, so far as may be, apply accordingly :Provided that where any such asset is held jointly by more than one person, theyshall be jointly and severally liable to pay the tax which is attributable to theincome from the assets so included.Section 66- TOTAL INCOME.In computing the total income of an assessee, there shall be included all incomeon which no income-tax is payable under Chapter VII.Section 67- METHOD OF COMPUTING A PARTNERS SHARE IN THE INCOME OF THE FIRM.OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4-1993Related JudgementsSMT. LAXMI MITTAL v. COMMISSIONER OF INCOME-TAX.COMMISSIONER OF INCOME-TAX v. SMT. MANDAKINI M. JOG.Section 67A- METHOD OF COMPUTING A MEMBERS SHARE IN INCOME OF ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS.(1) In computing the total income of an assessee who is a member of anassociation of persons or a body of individuals wherein the shares of themembers are determinate and known [other than a company or a co-operative
  • 8. society or society registered under the Societies Registration Act, 1860 (21 of1860), or under any law corresponding to that Act in force in any part of India],whether the net result of the computation of the total income of such associationor body is a profit or a loss, his share (whether a net profit or net loss) shall becomputed as follows, namely :-(a) Any interest, salary, bonus, commission or remuneration by whatever namecalled, paid to any member in respect of the previous year shall be deductedfrom the total income of the association or body and the balance ascertained andapportioned among the members in the proportions in which they are entitled toshare in the income of the association or body;(b) Where the amount apportioned to a member under clause (a) is a profit, anyinterest, salary, bonus, commission or remuneration aforesaid paid to themember by the association or body in respect of the previous year shall beadded to that amount, and the result shall be treated as the members share inthe income of the association or body;(c) Where the amount apportioned to a member under clause (a) is a loss, anyinterest, salary, bonus, commission or remuneration aforesaid paid to themember by the association or body in respect of the previous year shall beadjusted against that amount, and the result shall be treated as the membersshare in the income of the association or body.(2) The share of a member in the income or loss of the association or body, ascomputed under sub-section (1), shall, for the purposes of assessment, beapportioned under the various heads of income in the same manner in which theincome or loss of the association or body has been determined under each headof income.(3) Any interest paid by a member on capital borrowed by him for the purposes ofinvestment in the association or body shall, in computing his share chargeableunder the head "Profits and gains of business or profession" in respect of hisshare in the income of the association or body, be deducted from his share.Explanation : In this section "paid" has the same meaning as is assigned to it inclause (2) of section 43.
  • 9. Section 68- CASH CREDITS.Where any sum is found credited in the books of an assessee maintained for anyprevious year, and assessee offers no explanation about the nature and sourcethereof or the explanation offered by him is not, in the opinion of the AssessingOfficer, satisfactory, the sum so credited may be charged to income-tax as theincome of the assessee of that previous year.Related JudgementsOCEANIC PRODUCTS EXPORTING CO. v. COMMISSIONER OF INCOME-TAX.RANCHI HANDLOOM EMPORIUM v. COMMISSIONER OF INCOME TAX & ANR.Section 69- UNEXPLAINED INVESTMENTS.Where in the financial year immediately preceding the assessment year theassessee has made investments which are not recorded in the books of account,if any, maintained by him for any source of income, and the assessee offers noexplanation about the nature and source of the investments or the explanationoffered by him is not, in the opinion of the Assessing Officer, satisfactory, thevalue of the investments may be deemed to be the income of the assessee ofsuch financial year.Section 69A- UNEXPLAINED MONEY, ETC.Where in any financial year the assessee is found to be the owner of any money,bullion, jewellery or other valuable article and such money, bullion, jewellery orvaluable article is not recorded in the books of account, if any, maintained by himfor any source of income, and the assessee offers no explanation about thenature and source of acquisition of the money, bullion, jewellery or other valuablearticle, or the explanation offered by him is not, in the opinion of the AssessingOfficer, satisfactory, the money and the value of the bullion, jewellery or othervaluable article may be deemed to be the income of the assessee of suchfinancial year.Section 69B- AMOUNT OF INVESTMENTS, ETC., NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT.Where in any financial year the assessee has made investments or is found to bethe owner of any bullion, jewellery, or other valuable article, and the AssessingOfficer finds that the amount expended on making such investments or inacquiring such bullion, jewellery or other valuable article exceeds the amountrecorded in this behalf in the books of account maintained by the assessee forany source of income, and the assessee offers no explanation about suchexcess amount or the explanation offered by him is not, in the opinion of the
  • 10. Assessing Officer, satisfactory, the excess amount may be deemed to be theincome of the assessee for such financial yearSection 69C- UNEXPLAINED EXPENDITURE, ETC.Where in any financial year an assessee has incurred any expenditure and heoffers no explanation about the source of such expenditure or part thereof, or theexplanation, if any, offered by him is not, in the opinion of the Assessing Officer,satisfactory, the amount covered by such expenditure or part thereof, as the casemay be, may be deemed to be the income of the assessee for such financialyear;Provided that, notwithstanding anything contained in any other provision of thisAct, such unexplained expenditure which is deemed to be the income of theassessee shall not be allowed as a deduction under any head of incomeSection 69D- AMOUNT BORROWED OR REPAID ON HUNDI.Where any amount is borrowed on a hundi from, or any amount due thereon isrepaid to, any person otherwise than through an account payee cheque drawn ona bank, the amount so borrowed or repaid shall be deemed to be the income ofthe person borrowing or repaying the amount aforesaid for the previous year inwhich the amount was borrowed or repaid, as the case may be :Provided that, if in any case amount borrowed on hundi has been deemed underthe provisions of this section to be the income of any person, such person shallnot be liable to be assessed again in respect of such amount under theprovisions of this section on repayment of such amount.Explanation : For the purposes of this section, the amount repaid shall includethe amount of interest paid on the amount borrowed.Related JudgementsCOMMISSIONER OF INCOME-TAX v. K. P. ABDULLAH.Section 70- SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME.Save as otherwise provided in this Act, where the net result for any assessmentyear in respect of any source falling under any head of income is a loss, theassessee shall be entitled to have the amount of such loss set off against hisincome from any other source under the same head.
  • 11. Section 71- SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER.(1) Where in respect of any assessment year, the net result of the computationunder any head of income, other than "Capital gains", is a loss and the assesseehas no income under the head "Capital gains", he shall, subject to the provisionsof this Chapter, be entitled to have the amount of such loss set off against hisincome, if any, assessable for that assessment year under any other head 924 .(2) Where in respect of any assessment year, the net result of the computationunder any head of income, other than "Capital gains", is a loss and the assesseehas income assessable under the head "Capital gains", such loss may, subject tothe provisions of this Chapter, be set off against his income, if any, assessablefor that assessment year under any head of income including the head "Capitalgains" (whether relating to short-term capital assets or any other capital assets).(3) Where in respect of any assessment year, the net result of the computationunder the head "Capital gains" is a loss and the assessee has incomeassessable under any other head of income, the assessee shall not be entitled tohave such loss set off against income under the other head.(4) where the net result of the computation under the head "Income from houseproperty" is a loss, in respect of the assessment years commencing on the 1stday of April, 1995 and the 1st day of April, 1996, such loss shall be first set offunder sub-sections (1) and (2) and thereafter the loss referred to in section 71Ashall be set of in the relevant assessment year in accordance with the provisionsof that section.Section 71A- TRANSITIONAL PROVISIONS FOR SET OFF OF LOSS UNDER THE HEAD "INCOME FROM HOUSE PROPERTY".Where in respect of the assessment year commencing on the 1st day of April,1993 or the 1st day of April, 1994, the net result of the computation under thehead "Income from house property" is a loss, such loss in so far as it relates tointerest on borrowed capital referred to in clause (vi) of sub-section (1) of section24 and to the extent it has not been set off shall be carried forward and set off inthe assessment year commencing on the 1st day of April, 1995, and the balance,if any, in the assessment year commencing on the 1st day of April, 1996, againstthe income under any head.Section 71B- CARRY FORWARD AND SET OFF OF LOSS FROM HOUSE PROPERTY.Where for any assessment year the net result of computation under the head"Income from house property" is a loss to the assessee and such loss cannot beor is not wholly set-off against income from any other head of income inaccordance with the provisions of section 71, so much of the loss as has not
  • 12. been so set-off or where he has not income under any other head, the whole lossshall, subject to the other provisions of this Chapter, be carried forward to thefollowing assessment year and - (i) Be set-off against the income from houseproperty assessable for that assessment year; and(ii) The loss, if any, which has not been set-off wholly, the amount of loss not soset-off shall be carried forward to the following assessment year, not being morethan eight assessment years immediately succeeding the assessment year forwhich the loss was first computedSection 72- CARRY FORWARD AND SET OFF OF BUSINESS LOSSES.(1) Where for any assessment year, the net result of the computation under thehead "Profits and gains of business or profession" is a loss to the assessee, notbeing a loss sustained in a speculation business, and such loss cannot be or isnot wholly set off against income under any head of income in accordance withthe provisions of section 71, so much of the loss as has not been so set off or,where he has no income under any other head, the whole loss shall, subject tothe other provisions of thisChapter, be carried forward to the following assessment year, and - (i) It shall beset be off against the profits and gains, if any, of any business or professioncarried on by him and assessable for that assessment year :Provided that the business or profession for which the loss was originallycomputed continued to be carried on by him in the previous year relevant for thatassessment year; and(ii) If the loss cannot be wholly set off, the amount of loss not so set off shall becarried forward to the following assessment year and so on 925 ] :Provided that where the whole or any part of such loss is sustained in any suchbusiness as is referred to in section 33B which is discontinued in thecircumstances specified in that section, and thereafter, at any time before theexpiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as isattributable to such business shall be carried forward to the assessment yearrelevant to the previous year in which the business is so re-established,reconstructed or revived, and -(a) It shall be set off against the profits and gains, if any, of that business or anyother business carried on by him and assessable for that assessment year; and(b) If the loss cannot be wholly so set off, the amount of loss not so set off shall,in case the business so re-established, reconstructed or revived continues to be
  • 13. carried on by the assessee, be carried forward to the following assessment yearand so on for seven assessment years immediately succeeding.(2) Where any allowance or part thereof is, under sub-section (2) of section 32 orsub-section (4) of section 35, to be carried forward, effect shall first be given toprovisions of this section.(3) No loss (other than the loss referred to in the proviso to sub-section (1) of thissection) shall be carried forward under this section for more than eightassessment years immediately succeeding the assessment year for which theloss was first computedSection 72A- PROVISIONS RELATING TO CARRY FORWARD AND SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWANCE IN AMALGAMATION OR DEMERGER, ETC. -(1) Where there has been an amalgamation of a company owning an industrialundertaking or a ship with another company and the Central Government, on therecommendation of the specified authority, is satisfied that the followingconditions are fulfilled, namely :- (a) The amalgamating company was notimmediately before such amalgamation, financially viable by reason of itsliabilities, losses and other relevant factors;(b) The amalgamation was in the public interest; and(c) Such other conditions as the Central Government may, by notification in theOfficial Gazette, specify, to ensure that the benefit under this section is restrictedto amalgamations which would facilitate the rehabilitation or revival of thebusiness of the amalgamating company, then, the Central Government maymake a declaration to that effect, and thereupon, notwithstanding anythingcontained in any other provision of this Act, the accumulated loss and theunabsorbed depreciation of the amalgamating company shall be deemed to bethe loss or, as the case may be, allowance for depreciation of the amalgamatedcompany for the previous year in which the amalgamation was effected, and theother provisions of this Act relating to set off and carry forward of loss andallowance for depreciation shall apply accordingly.(2) Notwithstanding anything contained in sub-section (1), the accumulated lossshall not be set off or carried forward and the unabsorbed depreciation shall notbe allowed in the assessment of the amalgamated company unless the followingconditions are fulfilled, namely :- (i) During the previous year relevant to theassessment year for which such set off or allowance is claimed, the business ofthe amalgamating company is carried on by the amalgamated company withoutany modification or reorganisation or with such modification or reorganisation asmay be approved by the Central Government to enable the amalgamatedcompany to carry on such business more economically or more efficiently;(ii) The amalgamated company furnishes, along with its return of income for thesaid assessment year, a certificate from the specified authority to the effect thatadequate steps have been taken by that company for the rehabilitation or revivalof the business of the amalgamating company.
  • 14. (3) Where a company owning an industrial undertaking or a ship proposes toamalgamate with any other company and such other company submits theproposed scheme of amalgamation to the specified authority and that authority issatisfied, after examining the scheme and taking into account all relevant facts,that the conditions referred to in sub-section (1) would be fulfilled if suchamalgamation is effected in accordance with such scheme or, as the case maybe, in accordance with such scheme as modified in such manner as thatauthority may specify, it shall intimate such other company that, after theamalgamation is effected in accordance with such scheme or, as the case maybe, such scheme as so modified, it would make (unless there is any materialchange in the relevant facts) a recommendation to the Central Governmentunder sub-section (1).(4) Where there has been reorganisation of business, whereby, a firm issucceeded by a company fulfilling the conditions laid down in clause (xiii) ofsection 47 or a proprietary concern is succeeded by a company fulfilling theconditions laid down in clause (xiv) of section 47, then, notwithstanding anythingcontained in any other provisions of this Act, the accumulated loss and theunabsorbed depreciation of the predecessor firm or the proprietary concern, asthe case may be, shall be deemed to be the loss or allowance for depreciation ofthe successor company for the previous year in which business reorganisationwas effected and other provisions of this act relating to set off and carry forwardof loss and allowance for depreciation shall apply accordingly :-Provided that if any of the conditions laid down in the proviso to clause (xiii) orthe proviso to clause (xiv) to section 47 are not complied with, the set off of lossor allowance of depreciation made in any previous year in the hands of thesuccessor company, shall be deemed to be the income of the companychargeable to tax in the year in which such conditions are not complied with.(5) For the purposes of sub-section (4),- (a) "Accumulated loss" means so muchof the loss of the predecessor firm or the proprietary concern, as the case maybe, under the head Profits and gains of business or profession (not being a losssustained in a speculation business) which such predecessor firm or theproprietary concern would have been entitled to carry forward and set off underthe provisions of section 72 if the reorganisation of business had not taken place,(b) "Unabsorbed depreciation" means so much of the allowance for depreciationof the predecessor firm or the proprietary concern, as the case may be, whichremains to be allowed and which would have been allowed to the predecessorfirm or the proprietary concern, as the case may be, under the provisions of thisAct, if the reorganisation of business had not taken place.Section 73- LOSSES IN SPECULATION BUSINESS.(1) Any loss, computed in respect of a speculation business 932 carried on bythe assessee, shall not be set off except against profits and gains, if any, ofanother speculation business.
  • 15. (2) Where for any assessment year any loss computed in respect of aspeculation business has not been wholly set off under sub-section (1), so muchof the loss as is not so set off or the whole loss where the assessee had noincome from any other speculation business shall, subject to the other provisionsof this Chapter, be carried forward to the following assessment year, and -(i) It shall be set off against the profits and gains, if any, of any speculationbusiness carried on by him assessable for that assessment year; and(ii) If the loss cannot be wholly so set off, the amount of loss not so set off shallbe carried forward to the following assessment year and so on.(3) In respect of allowance on account of depreciation or capital expenditure onscientific research, the provisions of sub-section (2) of section 72 shall apply inrelation to speculation business as they apply in relation to any other business.(4) No loss shall be carried forward under this section for more than eightassessment years immediately succeeding the assessment year for which theloss was first computed.Explanation : Where any part of the business of a company other than acompany whose gross total income consists mainly of income which ischargeable under the heads "Interest on securities", "Income from houseproperty", "Capital gains" and "Income from other sources", or a company theprincipal business of which is the business of banking or the granting of loansand advances) consists in the purchase and sale of shares of other companies,such company shall, for the purposes of this section, be deemed to be carryingon a speculation business to the extent to which the business consists of thepurchase and sale of such shares.Section 74- LOSSES UNDER THE HEAD "CAPITAL GAINS".(1) Where in respect of any assessment year, the net result of the computationunder the head "Capital gains" is a loss to the assessee, the whole loss shall,subject to the other provisions of this Chapter, be carried forward to the followingassessment year, and - (a) It shall be set off aginst income, if any, under thehead "Capital gains" assessable for that assessment year; and(b) If the loss cannot be wholly so set off, the amount of loss not so set off shallbe carried forward to the following assessment year, and so on.(2) No loss shall be carried forward under this section for more than eightassessment years immediately succeeding the assessment year for which theloss was first computed.
  • 16. (3) Any loss computed under the head "Capital gains" in respect of theassessment year commencing on the 1st day of April, 1987, or any earlierassessment year which is carried forward in accordance with the provisions ofthis section as it stood before the 1st day of April, 1988, shall be dealt with in theassessment year commencing on the 1st day of April, 1988, or any subsequentassessment year as follows :- (a) In so far as such loss relates to short-termcapital assets, it shall be carried forward and set off in accordance with theprovisions of sub-sections (1) and (2);(b) In so far as such loss relates to long-term capital assets, it shall be reducedby the deductions specified in sub-section (2) of section 48 and the reducedamount shall be carried forward and set off in accordance with the provisions ofsub-section (1) but such carry forward shall not be allowed beyond the fourthassessment year immediately succeeding the assessment year for which theloss was first computedSection 74A- LOSSES FROM CERTAIN SPECIFIED SOURCES FALLING UNDER THE HEAD "INCOME FROM OTHER SOURCES".(1) In the case of an assessee, being the owner of horses maintained by him forrunning in horse races (such horses being hereafter in this sub-section referredto as race horses), the amount of the loss incurred by the assessee in the activityof owning and maintaining race horses in any assessment year shall not be setoff against income, if any, from any source other than the activity of owning andmaintaining race horses in that year and shall, subject to the other provisions ofthis Chapter, be carried forward to the following assessment year and - (a) Itshall be set off against the income, if any, from the activity of owning andmaintaining race horses assessable for that assessment year :Provided that the activity of owning and maintaining race horses is carried on byhim in the previous year relevant for that assessment year; and (b) if the losscannot be wholly so set off, the amount of loss not so set off shall be carriedforward to the following assessment year and so on; so, however, that no portionof the loss shall be carried forward for more than four assessment yearsimmediately succeeding the assessment year for which the loss was firstcomputed.Explanation : For the purposes of this sub-section - (a) "Amount of loss incurredby the assessee in the activity of owning and maintaining race horses" means -(i) In a case where the assessee has no income by way of stake money, theamount of expenditure (not being in the nature of capital expenditure) laid out orexpended by him wholly and exclusively for the purposes of maintaining racehorses;(ii) In a case where the assessee has income by way of stake money, theamount by which such income falls short of the amount of expenditure (not beingin the nature of capital expenditure) laid out or expended by the assessee whollyand exclusively for the purposes of maintaining race horses;(b) "Horse race" means a horse race upon which wagering or betting may belawfully made;
  • 17. (c) Income by way of stake money means the gross amount of prize moneyreceived on a race horse or race horses by the owner thereof on account of thehorse or horses or any one or more of the horses winning or being placedsecond or in any lower position in horse races.

×